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The 3 biggest problems doing business in Africa, according to an economist

Oct 03 2019 05:00
Carin Smith

The three biggest hurdles hampering business in Africa are liquidity, infrastructure and corruption, according to Celeste Fauconnier, an economist at RMB. Although politics remains among the top 10 problematic factors making it harder to do business on the continent, it is not among the top three, she said on Wednesday.

She spoke at the International Federation of Freight Forwarders Associations (FIATA) conference in Cape Town.

Fauconnier explained RMB research on where to invest in Africa.

"Regarding the top challenge of liquidity, a business must establish whether it would be easy for a client to pay and if the client has access to hard currency. Furthermore, establish how easy it would be for you to repatriate funds from the particular African country," said Fauconnier.

As for the second biggest challenge of infrastructure, she said it is estimated that Africa needs infrastructure investment of between $130bn (R1.9trn) and $170bn (R2.4trn) per year - up from an estimated $90bn (R1.3trn) per year a few years ago.

Where's the growth?

As a region, East Africa is expected to be the main growth driver on the continent for the next decade, according to Fauconnier. Apart from oil and gas having been discovered in the region, it is also benefiting from regional economic and trade integration.

Ease of online business

Ethiopia made it onto the top 10 list of African countries to invest in, mainly because it is starting to open its borders to international investors and is one of the fastest growing economies on the continent and in the world.

Rwanda is among the top five easiest countries to do business in Africa. A new business can be opened online within 24 hours. It furthermore offers access to the East African Community (EAC) consisting of six countries. While Tanzania has been on the top 10 list, it has started to slip, mainly due to government interventions, including in the resource sector.

As for countries in West Africa, she said they are unfortunately still mostly dependent on commodity prices.

In Zambia government debt levels are increasing significantly and the mining sector is starting to feel the effect. Apparently, electricity outages have reached about eight hours per day.

Mozambique is struggling at the moment, she said, but due to strong coal supplies and the discovery of oil and gas, its economy is expected to be boosted again in future. Three of the easiest economies to invest in on the continent are Mauritius, Botswana and Namibia, according to Fauconnier. All three have better sovereign ratings than SA, but she describes their growth rates as uninspiring.

Zimbabwe has what it needs



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